NEW YORK--(BUSINESS WIRE)--U.S. companies are split on how frequently they should put their
executive compensation programs to a nonbinding say-on-pay shareholder
vote, according to a new poll conducted by Towers Watson (NYSE, NASDAQ:
TW), a global professional services company. Furthermore, the poll found
that while some companies are making adjustments to their pay-setting
processes to prepare for the say-on-pay era, many are not yet clear on
how to assess the success of the vote, and even fewer are prepared to
address the results of the shareholder poll.

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires
companies to conduct say-on-pay votes at least every three years, but
the law leaves it to each company to decide whether it will hold annual,
biennial or triennial votes. Companies are also required to put the
say-on-pay frequency question to a nonbinding shareholder vote at least
every six years. Proposed SEC regulations would require public companies
to conduct the first of these so-called “say on when” votes in 2011.

Conducted in mid-December, the Towers Watson poll of 135 U.S. publicly
traded companies found that 51% of respondents expect to hold annual
say-on-pay votes, while 39% prefer the vote be held every three years,
and 10% anticipate holding biennial votes. The poll, however, found
companies have a range of reasons for favoring a particular voting
frequency. Four in 10 respondents cited accountability to shareholders
and a desire to minimize administrative burdens as factors having the
greatest influence on their vote-frequency recommendation, while
slightly fewer cited shareholder preferences, proxy advisor policies and
providing shareholders with an avenue to express concern about executive
pay without casting negative votes on other matters as key factors.

“Clearly, there’s no single right answer to the question of how
frequently these votes should be conducted that will work for every
company,” said Towers Watson senior consultant James Kroll. “Each
company seems to be assessing its own circumstances and needs, taking
into account its specific shareholder composition and the degree of
potential shareholder concern about the company’s executive pay
programs.”

The survey also found that nearly half (48%) of surveyed companies are
making some adjustments to their executive pay-setting process in
preparing for the upcoming proxy season, although many companies have
already strengthened their processes in recent years in light of growing
shareholder activism and intensifying scrutiny of pay issues. Among
those making further changes in preparation for the 2011 proxy season,
65% are devoting more attention to explaining their programs in the
Compensation Discussion & Analysis (CD&A), 41% are performing additional
analyses on the link between their executives’ pay and company
performance, and 30% have made or are considering changes to programs
such as severance, change-in-control benefits and perquisites that have
high visibility.

Somewhat surprisingly, almost half (49%) of the respondents don’t know
what level of favorable shareholder say-on-pay votes will be considered
a successful outcome by their boards, and only 8% of the respondents
have a process in place for analyzing the results of the vote and
developing appropriate action plans in response to potential shareholder
concerns. Of those companies that have defined how they will evaluate
success, most believe that a favorable shareholder vote of at least 80%
would be considered successful.

“The survey responses suggest that companies are struggling to
understand the implications of say-on-pay votes and many are taking a
wait-and-see approach to measuring success,” said Kroll. “While many
companies have been taking steps to make their executive pay programs
more shareholder-friendly in recent years, relatively few have been
thinking beyond their first say-on-pay votes to how they will analyze
and address shareholders’ input going forward. This new era will require
companies to step up their ongoing communication with shareholders and
tell a compelling story about how their pay programs help drive business
performance, while also listening and responding to shareholder
concerns. This is not a one-shot deal. It will be a continuous process.”

About Towers Watson

Towers Watson (NYSE, NASDAQ: TW) is a leading global professional
services company that helps organizations improve performance through
effective people, risk and financial management. The company offers
solutions in the areas of employee benefits, talent management, rewards,
and risk and capital management. Towers Watson has 14,000 associates
around the world and is located on the web at towerswatson.com.